The Future of Procurement: 6 Trends Organisations Should Know About

While the world is still trying to recover from the aftershock of COVID-19  and adjust to new norms, a surge in inflation and the outbreak of war have led to a rollercoaster of a year for the procurement and supply chain.

With that said, global organisations are currently facing even more new challenges, including geopolitical conflicts, talent skills gaps, rising costs, the consequences of climate change, new regulations and increased consumer demands. To assist with these challenges, however, companies are heavily relying on their procurement teams to drive change and enter a new paradigm of supply chain management. 

A paradigm where daily requests can be addressed quicker, where problem-solving is approached proactively, and errors and inefficiencies are reduced as migration to a new digital architecture takes precedence.

To give you more insight, in this blog, we’ve compiled a list of the top 6  procurement and supply trends to look out for in the years to come.

1) Generative AI

Slowly taking over the world and the operations of businesses across the globe, there aren’t many conversations about procurement that don’t mention the potential that generative AI has on the industry. 

Generative AI has the potential to revolutionise supply chain management, procurement and logistics, bringing meaningful gains to companies that adopt it. Essentially, GenAI-powered software engines can process much greater sets of data than previous forms of machine learning we’ve become accustomed to, while also having the capability to analyse extremely complex sets of variables. 

Not only that, but GenAI, unlike other AI systems currently available, can teach itself the nuances of a company’s supply chain ecosystem, enabling it to refine its analysis over time. 

The opportunities for GenAI in the procurement and supply industry are endless, with prospects of:

• Raising the efficiency and quality of processes,
• Ensuring regulatory compliance,
• Optimising supplier relationships and negotiations,
• Employing virtual logistics communication to handle routine enquiries. 

In KPMG’s “Unleashing the power of generative AI in procurement” report, it’s indicated that 50% to 80% of “the current procurement work can be automated, eliminated or shifted to self-service models”, re-emphasising the vast possibilities of using GenAI. With half of supply chain leaders now planning the implementation of AI, while 14% are already at the implementation stage, it appears that 2024 is expected to be a transformative year for this industry. 

2) Risk Management 

Since the start of the war on Ukraine in early 2022, geopolitical risks have been at an all time high. Not late after came the Palestine-Israel conflict, which caused even greater disruptions, mainly in the Red Sea and Suez Canal, and forced global shipping to re-route around Africa, bringing on delays and increased costs. In turn, international supply chains are being threatened, putting risk management at the top of every procurement team’s agenda.. 

Due to the increased unpredictability of global shipping, more and more businesses are considering migrating to a more local strategy in terms of their supply chains, also known as nearshoring, in an effort to build up resilience against such disruptions, by avoiding cross-border movements as much as possible. 

McKinsey’s 2023 Supply Chain Pulse Survey found that 64% of respondents were regionalising their supply chains, up from 44% in 2022, a number that is expected to grow exponentially in 2024. 

Companies considering nearshoring should, however, initially define critical product groups, while also making sure they extend the supplier research to new regions, not previously explored, in order to reach an optimal solution.

3) ESG and Scope 3 Emissions 

Traditionally, many businesses prioritised the gathering of Scope 1 (direct emissions) and Scope 2 (purchased electricity) data, however, the focus in years to come  is predicted to shift greatly towards Scope 3 emissions. 

Scope 3 emissions encompass all carbon emissions that are essentially indirectly generated by businesses such as:

• Employee commutes
• Business travel
• Distribution 
• End-of-life disposal of products, and
• Waste disposal 

Although the collection of Scope 3 data has been voluntary to date, the reporting of this data is now becoming a legal requirement in many companies, meaning businesses are obligated to comply. Businesses’ sustainable efforts are no longer perceived as an additional benefit, but a necessity for them to survive and succeed. 

To effectively monitor progress and set reduction targets, an emissions baseline must be established first. Through the employment of carbon accounting, more accurate assessments of Scope 3 emissions can be produced, while digital platforms allow for centralised systems, where suppliers can input their emission data, to enable better integration in a company’s sustainability report. 

4) Significance in Data

Data analytics have, in recent years, established their significance in numerous industries, and that’s also the case for procurement and supply. 

Businesses no longer have the luxury of making decisions that aren’t data-driven, since the effective utilisation of data can lead to:

• Reduced costs
• Risk mitigation 
• Improved demand forecasting
• Strategic value, and 
• Informed decision-making 

It’s widely understood that organisations that embrace data and analytics outperform competitors with an estimated performance advantage between 30% and 90%, visible in various metrics. 

Since data analytics has the capability to discover trends that can be leveraged to reach both short and long-term organisational targets, it’s no surprise that  businesses are expected to place data at the heart of their operations, to reach proven decisions with better outcomes. 

However, it’s important to note that poorly handled data can cause confusion to procurement professionals due to the volume and complexity of the data, so establishing a strong structure is essential. 

5) Transparency and Visibility 

One of the biggest challenges the procurement and supply industry faces is the ongoing struggle to establish transparency and visibility due to its complex nature. 

It’s a known fact that businesses that can establish trust with their target audience can build long-term relationships with continuous transactions. 

One way to build that trust is through supply chain transparency, where businesses share data-driven information regarding the status of a product at each stage of the supply chain journey, with internal and external stakeholders. Some examples of supply chain transparency include:

• Raw material sourcing 
• Environmental protection
• Safety standards
• Product quality, and
• Labour practices

Through transparency across the supply chain, organisations can build greater and more in-depth insights, identify potential risks and drive ESG goals through traceability. 

6) Low-code Platforms 

Regardless of what stage of their digital transformation journey they’re in, it’s predicted that more and more businesses will utilise low-code platforms to reap the quick-win benefits. A visual software development approach, low-code refers to the creation of applications by minimising traditional, complex, hand-coding processes.

It’s a user-friendly, drag-and-drop environment that makes app development much more approachable for beginners as well as seasoned professionals, allowing for quicker, more inclusive and streamlined business software creation. 

This means that users with little technical knowledge can quickly build, test and implement new capabilities, enabling organisations to swiftly adapt their application to changing strategies, disruptive events and the latest market conditions. 

Due to low-code’s ability to lower the workload for IT professionals, 84% of businesses now use low-code for their application building, suggesting it’s more popular than ever. 

The Future of Procurement & Supply 

As we continue to unravel the upcoming procurement and supply trends, businesses are called upon to address key strategic questions about their supply chains, with the ultimate goal of saving costs and generating balance. Procurement teams, however, are expected to play a significant role in driving innovation, secure supply, increased sustainability and digitalisation. 

Companies that recognise this potential and effectively employ strategies to tackle these questions are likely to secure long-term benefits.

Learn how to  implement contemporary procurement in your organisations with a 100% online CIPS qualification today.